Cryptocurrency as Part of Your Estate Plan

Have you taken the plunge into cryptocurrency? If you invest in the world of Bitcoin, Ethereum, Ripple, Litecoin, etc., you need to consider investing in some unique estate planning to protect these cutting-edge assets when you pass away. Contrary to the familiar process through which we can access traditional asset accounts port-mortem, cryptocurrency accounts require several layers of confidential information to prove ownership, spend, or trade the currency. For preserving and distributing your cryptocurrency according to your wishes, there are several important considerations to address in your estate planning.

Who will access your Private Key? In this virtually unregulated market, your private key (a secure digital code) is used to verify ownership and allow access to digital assets, using multiple passwords and multi-factor authentication to protect unauthorized access. Without knowing the appropriate layers of information, however, it is virtually impossible to access cryptocurrency keys and entire accounts can be lost to cyber-space. To avoid this, you need to leave a detailed record for your fiduciary that will allow him/her to find your accounts, use the private key to gain access, and execute a two-factor authentication process for each account–which generally requires immediate access to your mobile phone.

Who will have “custody” of your Wallets? Cryptocurrencies are traded on their own exchanges, with coins “stored” in either a digital wallet or in your hardware wallet. In actuality, the wallet stores a private key that shows ownership of a public key, which is another digital code tied to a certain amount of your currency. These private and public keys allow you to send and receive coins in your wallet while the wallet acts as a personal ledger of transactions. A hardware wallet is an external, encrypted drive, which stores the keys evidencing your currency ownership. If a hardware wallet is lost or damaged, the assets recorded there may be un-retrievable without a duplicate drive and knowledge of all the security information required to restore the digital record. To take custody of your wallets, your fiduciary should have legal authority to act for you and will need to know user names, passwords, security questions, and have access to your mobile phone.

Use your estate plan to manage and protect the assets. Your estate planning documents should name the fiduciary to act on your behalf and also explain how you want your cryptocurrency distributed. Because this is a relatively new, quickly evolving, and volatile arena, specifically providing your agent with authority over your cryptocurrency as well as the necessary information to access such assets is vital. For significantly wealthy investors, implementing planning techniques tailored to your financial situation can address gift, estate, and income tax issues in a manner that may significantly benefit your estate.

Cryptocurrency investors risk losing their assets at death by failing to properly plan. To ensure your cryptocurrency assets are appropriately incorporated into your estate plan, contact Kling Law Offices for a complimentary consultation regarding passing your digital assets according to your goals and desires.

Your Estate Plan: Distributing Assets Outside of Probate

As advocates of good estate planning, we work hard to make sure our clients understand they have a wide range of choices for reaching their goals. Generally, the goal is to avoid probate—the court process that can be costly and time-consuming. Goals are accomplished by organizing your estate so assets will be transferred without having to seek directions or authority from the probate court.

Transferring title into the name of your trust is an exceptionally important means to protect a variety of assets from probate—the primary one being real estate. Accomplishing a non-probate transfer of real estate requires establishing a trust and titling your real estate holdings in the name of the trust. For example, the deed to your home would list the property owner as the “Kling Family Trust” rather than Michael and Ann Kling, or an individual name. Since the trust document provides instructions for transferring property upon an owner’s death, there is no need for probate to determine the property’s new owner.

There are also some simple steps you can take to avoid the probate of smaller assets, such as a car or bank account. In Nevada, our Department of Motor Vehicles (DMV) allows vehicle owners to add a beneficiary to their motor vehicle title through a Transfer on Death (TOD) title. The vehicle owner must submit the Certificate of Title, a Transfer on Death Application, and a $21 title fee. The DMV will, in about 8 weeks, issue a new title with the beneficiary listed. Ownership of the vehicle will automatically pass to the beneficiary upon the death of all legal owners. The beneficiary must apply for a new title to complete the process and must also obtain a new registration before driving the vehicle.

Like the TOD title, a Payable on Death (POD) account designation identifies one or more beneficiaries to receive bank account assets upon the owner’s death. Holding an account with a POD designation allows the primary owner to maintain complete ownership and control of the account while living. Then, upon the owner’s death, the account will automatically transfer to the designated beneficiary without needing a probate court order.

Using beneficiary designations is another straightforward way to direct asset transfers without going through probate. Retirement accounts, life insurance policies, and certain brokerage accounts are frequently governed by beneficiary designations. Whomever you name on the appropriate form(s) will receive the assets upon the owner’s death. Notably, retirement assets are often controlled by Federal law and these beneficiary designations will override other estate planning provisions, including trusts, a will, or even directives in a divorce decree.

Coordinating title transfers, TOD titles, POD accounts, and beneficiary designations with your overall estate plan is essential to avoid conflicts or errors. An estate planning attorney can help align your actions with your intent. We encourage you to call Kling Law Offices for a complimentary consultation to insure your planning achieves your goals and desires.

What to Do Before a Loved One Passes Away

One of the most difficult things any of us will ever face is the passing away of a loved one. There is no way around it; death is an emotionally wrenching time. There are several things you and your loved ones can do to make the decisions and process surrounding a death much easier.

The first thing you should do is talk—to your spouse, your partner, your children, your parents, and your closest friends. Even brief statements about your wishes and desires for end-of-life care, burial choices, bequests, and the handling of your estate are valuable tools for your loved ones. If your loved ones know your desires, they can honor you by making appropriate choices if, or when, you are unable to act on your own behalf.

Couples should discuss their wishes together and commit to upholding each other’s choices, even knowing how difficult it may be to carry out those choices. Parents should regularly sit down with their children and have age-appropriate discussions about their wishes and expectations. If one child has been selected as a decision-maker under a Power of Attorney, or another legal document, that should be made clear. It is important for adult children to hear their parents’ plans and choices and have the chance to ask questions to put information into context. Talking is the best start, and then you need to put some power into your words by having an estate plan.

Your estate plan will be made up of several documents that work together during your lifetime and after your death. The key documents generally include a will, a trust, financial powers of attorney, medical powers of attorney, and a living will. Through these documents, you give others the legal tools to handle your affairs in the manner you desire. Making tough decisions for a loved one is just that: tough. Knowing those tough decisions are made according to your wishes will ease the burden by reducing emotional angst and family drama.

As the “Trustmaker” of your estate plan, you provide a simple and complete way of dealing with your needs, your passing, your assets and, when appropriate, the transfer of those assets to your beneficiaries. Your Successor Trustee will have a wide range of powers and responsibilities, which become effective upon your death or incapacity, or whenever you choose to transfer management of the trust. Good estate planning provides a thorough, systematic approach for handling your affairs that will give you the peace of mind that you deserve about your future.

At Kling Law Offices, we strive to help you plan for your future and to help your loved ones successfully navigate a life without your presence. To help accomplish that, we offer a Successor Trustee Handbook for free download on our website. We urge everyone to start their planning with a conversation among loved ones, followed by a phone call to our office for a free consultation about the power of a properly executed estate plan.

Tax Time and Our New Tax Laws

It is almost tax time and we have new tax laws on the books. As exciting (or not) as tax law may be to you, for the most part, the new laws will not affect your 2017 return. Since the first quarter of 2018 has already slipped by, however, this is a great time to consider the impact of the new laws and how they will affect your future tax returns.

First off, you should note that most of the individual tax provisions are temporary. They will expire on their own accord in 2025, automatically reverting to 2017 rules, unless extended by Congress in the meantime. On the other hand, the corporate tax changes are permanent – at least until Congress votes to change them.

For individuals, the standard deductions are nearly doubled, rising to $24,000 for couples, $12,000 for singles, and $18,000 for heads of households. With these higher standard deductions, we expect fewer people will itemize, especially since the new laws eliminate many of the deductions individuals customarily claimed.

One of the more controversial changes to deductions is the limitation on deducting state and local taxes (SALT). Taxpayers are now limited to only deducting $10,000 of any combination of residential property taxes and state income or sales taxes. By contrast, property taxes remain fully deductible for businesses or a for-profit activity.

Other write-offs commonly used by individual filers in the past have been eliminated, including job-related moving expenses (except for military), as well as ALL miscellaneous write-offs subject to the 2% AGI threshold such as: employee business expenses, brokerage and IRA fees, alimony for post-2018 divorce decrees, personal casualty losses (except those in presidentially declared disaster areas), theft losses, hobby expenses, and tax return preparation costs. Possibly more significant in Las Vegas than in other areas, the write-off for personal gambling losses to the extent of winnings has remained in-tact. In contrast, small business owners and self-employed persons would still be able to declare business expenses in their IRS Form 1040 Schedule C.

Regarding estate taxes, Congress nearly doubled the lifetime estate and gift tax exemption to just over $11 million. Done properly, under the new laws, a married couple could gift or transfer an additional $11.2 million at death. Thus, while the law is certain, anyone who can afford to do so should use their exemption to shelter these assets from estate taxes. The higher exemption rates are temporary measures that will sunset in 2026, automatically returning to the $5.49 million limit of 2017 absent further Congressional action.

The annual gift tax exclusion amount was not changed, but jumps to $15,000 due to an inflation adjustment. Asset step-up in basis at death also remains unchanged. Income tax rates for trusts and estates have been revised to 4 brackets ranging from 10% to 37% of taxable income.

These tax law changes are significant, and Kling Law Offices can help you understand their effects and how you can take advantage of the planning opportunities presented.

Helping Aging Parents Through Their Late-In-Life Journey

Although aging is a natural part of life, it often takes adult children by surprise to see changes in parents that signal additional care-giving is needed. If you haven’t discussed your parents’ wishes and plans for living out life, and for after their passing, you should know that it is never too late (or too early) to start the conversation. As with most of life, the more prepared you are, the easier it is to deal with difficulties or a crisis along the way.

What should you discuss with your aging parents? There are some important basics about which you should know details:

Do they have a will? A will makes clear who will receive your parents’ assets and personal property. A properly written will helps avoid disagreements over the estate after their deaths.

Is there a trust? A revocable living trust allows your parents to retain control over their estate and to use assets as they desire during lifetime. They designate what property goes into the trust and to whom it will be given (home, investments, other assets, and also list their tangible personal property). During their lifetimes, your parents are executors of their own living trust. A trust has an important advantage: it allows their estate to avoid probate at the time of their deaths.

Do they have Durable Powers of Attorney for Health Care and HIPAA Releases? A durable power of attorney for healthcare allows a designated person to make healthcare decisions for your parent if he/she becomes incapacitated. A HIPAA release gives the designee access to health records and physicians.
Do they have Durable Powers of Attorney for Finances? A durable power of attorney for finances allows the named fiduciary to manage financial affairs, pay bills, sell property, and so on.

Have they executed a Living Will? A living will (also known as an advanced health care directive) sets out what kind of care your parents want to receive if they become ill or incapacitated.

Knowing whether your parents have these documents, and who has been designated as decision makers or the fiduciary, will ensure that you can assist them if a medical or financial emergency arises. If any of these important documents is not in order, it should be addressed immediately.

After learning about your parents’ plans and where to find important information, you should have a good foundation for their ongoing care and final wishes. Beyond the basics, you can learn what is important to your parents by listening carefully and asking the follow-up questions that seem to fit the situation. By properly planning and having these important discussions, your parents’ late-in-life journeys will be far less stressful for everyone in the family.

If your family needs help planning for this journey, please contact Kling Law Offices for a free consultation. We can help you start the conversations, create and organize important documents, and plan so you and your parents will have the peace of mind you deserve.